Four words: financialization, debtocracy, diminishing returns. The entire global economy,
developed and developing nations alike, is now dependent on cheap, abundant credit
for everything: for "growth," for asset inflation, and ultimately for central
state deficit spending, which props up all the cartels, rentier arrangements,
fiefdoms and armies of toadies, lackeys, apparatchiks and embezzlers that suck off
the Status Quo.

1. As interest rates/yields rise, all the existing
bonds paying next to nothing plummet in market value

2. As mortgage rates rise, there's nobody left who
can afford Housing Bubble 2.0 prices, so home prices fall off a cliff

3. Once you can get 5+% yield on cash again, few people are willing to risk capital in
the equities markets in the hopes that they can earn more than 5% yield before the next
crash wipes out 40% of their equity

4. As asset classes decline, lenders are wary of loaning money against these assets;
if the collateral for the loan (real estate, bonds, stocks, etc.) are in a waterfall
decline, no sane lender will risk capital on a bet that the collateral will be sufficient
to cover losses should the borrower default.

Let's take a look at four charts about housing and household net worth. For
the middle class, the home remains the key asset, so housing and household net worth
are correlated.

Here is a chart of mortgage rates since 1970. Rates were pushed to 17+% to
snuff inflation in the early 1980s, and they've dropped over the past 30 years
to historic lows: the rate
for a fixed-rate 30-year conventional mortgage was about 3.5% a few weeks ago. It has
now risen above 4%.

In the golden age of growth from 1991 to 2002, mortgages rates bounced between about
7% and 9%. The band from 1970 to 1979 was about 7.5% to 10%.

In other words, in eras of strong growth and low inflation, mortgage rates have
been around 7% to 9%. So what happens to the monthly payments when the mortgage
rate doubles from 4% to 8%? The monthly payments rise by about 54%. And what happens to the price of
houses when rates double? They fall to the point that households borrowing money at
7.5% - 8% can afford to buy a house, i.e. a price much lower than today's Housing Bubble 2.0
prices.

Here's mortgage debt. If mortgage debt had expanded at the previous rate, total
debt would be closer to $5 trillion instead of $10 trillion.

You see what happens when debt becomes cheap and abundant: debt rises faster
than wages or assets.

But hasn't household wealth increased mightily in the past decades?
Here is a chart that plots the relationship of household net worth and total credit
owed, i.e. debt:

Household wealth may be rising, but what this chart reveals is debt is rising even faster--that's
why the line is declining. Put another way, every dollar of new debt is generating
less and less wealth.

You might think that The Federal Reserve's policy of making credit cheap and abundant
would goose people to consume and invest more money. Alas, the velocity of money
is hitting historic lows: the Fed may be creating credit but people and enterprises
aren't putting that money into circulation.

That's why all asset classes that depend on cheap, abundant credit are doomed: once
yields/rates rise, the valuations of those assets implode. And once valuations implode,
there's not enough collateral left to support the loans used
buy all those cheap-credit-inflated assets. So the financial system also implodes.

Things are falling apart--that is obvious. But why are they falling
apart? The reasons are complex and global. Our economy and society have structural
problems that cannot be solved by adding debt to debt. We are becoming poorer, not
just from financial over-reach, but from fundamental forces that are not easy to identify
or understand. We will cover the five core reasons why things are falling apart:

Complex systems weakened by diminishing returns collapse under their
own weight and are replaced by systems that are simpler, faster and affordable. If
we cling to the old ways, our system will disintegrate. If we want sustainable prosperity
rather than collapse, we must embrace a new model that
is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Not accepting responsibility and being powerless are two sides of
the same coin: once we accept responsibility, we become powerful.

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